Four More Years: Europe’s Meltdown

March 10, 2013

Back in the 1960s, the U.S. peace movement came up with a catchy phrase:
“What if the schools got all the money they needed and the Navy had to hold a
bake sale to buy an aircraft carrier?” Well, the Italian Navy has a line
of clothing, and is taking a cut from a soft drink called “Forza Blu” in order
to make up for budget cuts. It plans to market energy snacks and mineral water.

Things are a little rocky in Europe these days.

Unemployment is over 25 percent in Greece, Spain and Portugal—and far higher
among young people in those countries—and most economies are dead in the water,
if not shrinking. Relentless austerity policies have shredded Europe’s
traditional social compact with its citizens, fueled a wave of debt-related
suicides in the continent’s hard-hit south—Greek suicide rates jumped
37 percent from 2009 to 2011—and locked much of the continent into a seemingly
endless spiral: austerity means layoffs, fewer jobs equal less revenue, lower
revenues leads to more austerity=the classic debt trap.

“The economic situation in Europe is moving from bad to catastrophic,” says Douglas McWilliams, chief executive
for the Centre for Economic and Business Research. “There is a danger that
economic problems will spill over into social breakdown.”

So why hasn’t the U.S. Treasury pressured lending agencies, like the
International Monetary Fund (IMF) and the World Bank to shift from austerity
formulas to stimulation policies? Why is the Obama administration pressing
Europeans to increase military spending? And what should it matter to
Washington if Britain remains in the European Union (EU)?

It is not just that Europe is in crisis, it is that, as one Portuguese
pensioner told Reuters,
“We see no light at the end of the tunnel, just more pain and difficulties.” In
November the European Commission
reported that unemployment on the continent—now in excess of 25 million
people—would continue to rise. “The economic outlook is bleak and has worsened
in recent months and is not expected to improve in 2013,” the Commission found.
“The EU is currently the only major region in the world where unemployment is
still rising.”

A UN report predicts that Europe will not recover the jobs lost in the 2008
financial crisis until at least 2017. One EU study found that the crisis
threatens to turn the 94 million Europeans between ages 15 and 29 into a “lost
generation.”

All this translates into a level of economic misery that Europeans have not
seen in more than 80 years. Indeed, Standard & Poor says Greece’s meltdown
is worse in “duration and scale” than Germany’s was during the 1930s. The aid
agency Oxfam reports that if
the Madrid government’s current austerity policies continue, the percentage of
people below the poverty line in Spain could rise from 27 percent to 40
percent. United Kingdom Chancellor George Osborne says he expects his country’s
austerity program to continue until 2018.

The pain is so intense that it has helped fuel credible regional succession movements
in Spain, Belgium, and Scotland.

But the push for yet greater austerity has less to do with a deep concern by
Europe’s elites over debt—it is high but manageable—than as part of a stealth
campaign aimed at dismantling rules and regulations that protect worker rights,
unions, and the environment.

“We are seeing some worrying signs of anti-business rhetoric among some of
Europe’s leaders and believe that this is not a productive and collaborate
approach to take,” DuPont’s head man for Europe, the Middle East and Africa
told the Financial Times.
“Business and government need to collaborate to face the challenges of the
future.”

The “anti-business rhetoric” comes mainly from workers—and increasingly
members of the middle class—desperate to hold on to jobs and a living wage.
Ford, General Motors, Hewlett Packard, Citibank and Japan’s Nomura Bank have
cut jobs, increasingly moving their operations to “developing countries,” that
is, those with weak unions and/or authoritarian governments. While U.S.
executives increased their investments in Europe by only 3 percent, they have
amped up those in the “developing world” by 25 percent.

In short, corporations are saying to Europeans, give up your working
conditions, wages, and benefits, or we export your jobs.

Workers have not taken this employer offensive lying down. There have been
strikes and walkouts from Spain to the Czech Republic, and
austerity adherents have suffered ballot box reversals. Chancellor Angela
Merkel—the queen of harsh economic policies—took a beating in the last round of
German state elections.

The Obama administration could help halt Europe’s plunge from first world to
second world status, but is has been largely silent on the austerity/debt
formula. For instance, last summer an IMF study indicated that
endless austerity would not only tank economies across the continent, but also
increase the debt problem. However, that study has yet to be translated into
policy, even though the fund’s current managing director, Christine Legarde, was
the White House’s candidate for the post.

Much the same could be said for the World Bank. The U.S. nominated its
current American president, Jim Yong Kim of Dartmouth College. Rather
than stepping back from austerity programs, however, he recently warned
developing nations not to use economic stimulus to improve their economies,
because it would raise “indebtedness and inflation.”

So, while the U.S. Treasury Department has issued a few mild dissents about
the efficacy of austerity programs, the two major economic organizations that
the U.S. dominates have held the course—straight for the iceberg.

One thing the White House could do is endorse the call by Alexis Tsipras,
leader of the Greek Syriza Party, for a European summit on the debt.
Tsipras proposes that such a gathering could do what the 1953 London Debt
Agreement did to help post –war Germany recover: cut the debt by 50 percent and
spread payments over 30 years.

A major concern for Washington is the North Atlantic Treaty Organization
(NATO), originally created in 1949 to deal with a supposed threat of a Soviet
invasion of Europe. Recent archive research demonstrates that the
Soviets never even had such a plan on paper. The hordes of Red armor pouring
through the Fulda Gap was a construct of the Cold War, little more than a
rationale for maintaining significant U.S. military forces on the continent.

But NATO’s role shifted after the collapse of the Soviet Union in 1989.
Violating a pledge not to push NATO eastwards, the alliance vacuumed up former
Warsaw Pact members, Poland, Bulgaria, Romania, Hungary, Czechoslovakia (now
two countries), and Albania, and added Latvia, Lithuania, and Estonia. There
are currently 28 members of NATO, including the U.S, and Canada.

While NATO intervened in the 1995 Bosnia-Herzegovina war, it was not until
the 1999 war with Yugoslavia that the alliance shifted from defense to offense.
But the war against Serbia was still “in country,” so to speak, because
Yugoslavia is part of Europe. The Sept. 11, 2001 attacks on the World Trade
Center and the Pentagon changed all that. While it was the U.S. and Britain
that initially invaded Afghanistan, within two years some 50,000 NATO troops
were serving in the war, and NATO graduated from a regional formation to an
international military alliance.

Its most recent “out of area” operation was Libya, where NATO’s airpower,
weapons, and Special Forces overthrew the regime of Muammar Gaddafi. NATO is
currently involved in the Syrian war, but so far only to deploy missiles in
Turkey and support the insurgents with money, supplies and intelligence. Direct
intervention is a possibility, but the muddled nature of the opposition to the
Assad regime apparently gives some in the alliance pause. Libya’s current
status as a failed state, and the wash-over of that war into the current crisis
in Mali, is on everyone’s mind.

The U.S. has long pushed for NATO to become a global alliance that
could deal with unrest in Africa, instability in the Middle East and tensions
in South Asia and the Pacific. But the Afghanistan experience was a wrenching
one for NATO. Rather than a quick war and some feel-good nation building, the
war has turned into a quagmire. Member by member, NATO has bailed out in the
last three years, and the war is extremely unpopular on the European home
front.

But Europeans are not the only people turning away from foreign engagements.
The Afghan War is also deeply unpopular in the U.S., which creates a problem,
because military power—its actual use or threat of it—has been central to
American foreign policy since the 1846 Mexican War. Besides Afghanistan, the
U.S. is currently fighting wars in Yemen and Somalia, aiding the French in
Mali, chasing after the Lord’s Resistance Army in Uganda, setting up drone
bases in North Africa, and increasing its military footprint in Asia and Latin
America. The U.S. is also contemplating attacking Iran over its nuclear
program.

But while the U.S. economy is currently stronger than Europe’s, spending
vast amounts of money on foreign wars is not popular. Having someone to share
the bills with—financial and political—is central to strategy. That, in part,
explains why the Obama administration has come down so hard on Britain’s
Conservative-Liberal government’s plan for a referendum that could see London
exit the EU. Britain is one of NATO’s heavy hitters and anything that might
weaken that alliance is frowned upon in Washington.

The fact is that the U.S. needs NATO, because it no longer has the resources
to go it alone. That is why the Obama administration is leaning hard on
NATO members to step up their military spending, hardly a popular request when
the continent is on the ropes financially. The U.S. currently pays about 75
percent of NATO’s bills and would like to see other countries take on more of
that burden. It will be a hard sell. Italy, for instance, is cutting 33,000
troops and 30 percent of its senior staff over the next decade. Britain’s
Conservatives are finding their plan to spend $36.3 billion on a new generation
of nuclear-armed submarines an uphill battle.

The current NATO plan to install anti-missile systems in Romania,
Poland, and Turkey is ill-considered and unnecessarily annoys Russia. While the
Obama administration was initially skeptical of anti-missile systems—they are
expensive, don’t work, and accelerate the arms race—the White House now
endorses the deployment. As a result, the Russians are modernizing their missile forces and have halted talks
over arms control on the continent. Since Iran has neither the warheads nor the
missiles to threaten Europe, one can hardly blame the Russians for assuming the
NATO ABM system is aimed at them.

The Obama administration should revitalize the Anti-Ballistic Missile Treaty
that the Bush Administration dumped and stop the deployment of destabilizing
and provocative ABM systems in Europe (and Asia as well).

NATO is an artifact of the Cold War and long since past retirement. It is
also dangerous: if you build an alliance you will eventually use it. The
debacle of the Afghan War and the chaos that the Libyan war has unleashed on
Africa is a warning that the use of military power is increasingly outdated. It
also drains valuable resources better used to confront the economic and
environmental challenges the world faces.